A property was purchased by a property manager's client for $7,000, 000 with a $2, 000, 000 down payment and a 30 year. $ 5,000, 000 loan with a 7% interest rate. Grous potential income (GPI) for the property is expected to be $850, 000 in year one. Operating expenses are expected to be $350,000 in year one. Both are expected to increase by 3% each year. The property is expected to sell at the end of year five at a 7% going-out capitalization rate with 5% costs of sale. The investor's required rate of returns 12%.
A property was purchased by a property manager's client for $7,000, 000 with a $2, 000, 000 down payment and a 30 year. $ 5,000, 000 loan with a 7% interest rate. Grous potential income (GPI) for the property is expected to be $850, 000 in year one. Operating expenses are expected to be $350,000 in year one. Both are expected to increase by 3% each year. The property is expected to sell at the end of year five at a 7% going-out capitalization rate with 5% costs of sale. The investor's required rate of returns 12%.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A property was purchased by a property manager's client for $7,000, 000 with a $2, 000, 000 down payment and a 30 year. $ 5,000, 000 loan with a 7% interest rate. Grous potential income (GPI) for the property is expected to be $850, 000 in year one. Operating expenses are expected to be $350,000 in year one. Both are expected to increase by 3% each year. The property is expected to sell at the end of year five at a 7% going-out capitalization rate with 5% costs of sale. The investor's required
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